Report: Trump used dubious tax avoidance scheme in 1990s

WASHINGTON — Donald Trump avoided paying potentially hundreds of millions of dollars in taxes in a way that even his own lawyers considered questionable, The New York Times reported Monday.

The newspaper said the maneuver also may explain how Trump posted a one-year loss of more than $900 million a few years later, enabling him to avoid paying federal income taxes for perhaps 18 years.

At issue is how Trump was able to cancel hundreds of millions of dollars of debt as his casino empire in Atlantic City went broke in the early 1990s. Canceled debt generally is treated as taxable income, meaning Trump would have owed the Internal Revenue Service significant money on debt that his creditors forgave.

The Times said it obtained documents from a quarter-century ago showing Trump essentially traded the debt relief for nearly worthless “partnership equity” to avoid any tax liability. In practice, the strategy was almost identical to a tax maneuver that was already outlawed, but differed in minor details. Trump’s own lawyers advised him that the IRS would likely find it improper if he were audited, the paper said, and Congress explicitly outlawed the maneuver in 2004.

Hillary Clinton, then a New York senator, was among the lawmakers who voted to close the loophole.

Hope Hicks, Trump’s spokeswoman, told The Times that its reporting “suggests either a fundamental misunderstanding or an intentional misreading of the law.” She said Trump doesn’t think taxpayers “should file returns that resolve all doubt in favor of the IRS.”

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